Playboy in Talks With Iconix to Sell Itself —Sources

Playboy Enterprises is in preliminary talks to sell itself to Iconix Brand Group, people familiar with the matter said.

At this point, the goal of Iconix, which owns and licenses clothing brands such as Candies, Joe Boxer, and Rocawear, is to bring in a publishing partner to buy Playboy's namesake magazine while it would keep the brand licensing part of the company, one of the sources said.

Playboy and Iconix declined to comment.

In addition to its well-known magazine, Playboy also has TV operations and a licensing business based on its 'Bunny Ears' logo, an image of a rabbit wearing a bowtie.

The sources declined to give further detail and spoke on condition of anonymity because the talks were not made public.

Bloomberg was first to report the story, after which Playboy's shares rose 41 percent, closing at $4.06 on the New York Stock Exchange.

Based on Wednesday's closing price, before the stock jumped on news of the talks, Playboy shares had lost about 75 percent of their value over the past two years. Playboy's market cap was about $100 million based on Wednesday's closing price.

Playboy has been open to talking to buyers for months, even before the appointment of a new chief executive in June, when Scott Flanders replaced Hefner's daughter, Christie Hefner.

'It's difficult to say what the value is on a company that ... is losing money,' Nick Gibbons, senior analyst at Gradient Analytics, said.

Playboy magazine's sales have suffered in recent years as more people get adult entertainment and pictures on the Internet, and as advertising sales have fallen at most mainstream U.S. magazines and newspapers.

'Playboy did generate $250 million in revenue over the last 12 months, so if Iconix applied a 1x multiple to revenues, which I would doubt given that the company is not making money, that would equate to a $250 million purchase price consideration,' Gibbons said.

Iconix Has Cash

Iconix had $233.4 million in cash on hand as of Sept. 9, according to a quarterly filing. Chief Executive Neil Cole told Reuters in August the company planned

to spend around $300 million to $400 million in acquisitions over the next 18 months, adding it was negotiating five deals at that time.

'They have the financial firepower to buy the licensing part of the business,' Eric Beder, an analyst with Brean Murray, Carret, said. He estimated the value of Playboy, including debt, at about $200 million.'

'So if Iconix could find a partner that would buy the other parts of the business, they could probably buy the licensing piece right then and there with the cash they have on hand.'

Playboy magazine was founded by Hugh Hefner in 1953 as a magazine for urban sophisticates and the men who wanted to fit that description.

It became a racy icon of the swinging bachelor era in the 1960s, offering the promise of an urban lifestyle, as well as salacious but usually restrained photograph spreads of naked women. In addition to the models, celebrities such as singers Nancy Sinatra and Madonna have been in the magazine.

Playboy also built a reputation as a magazine for literati, featuring contributions over the years from writers like Norman Mailer, Vladimir Nabokov and P.G.

Wodehouse, as well as interviews with well known figures from jazz legend Miles Davis to former U.S. President Jimmy Carter.

Iconix is known to grow through acquisitions, mainly doing licensing deals.

'I wouldn't put any odds on the deal just yet. I think if anything, they'll be interested in the retail side of products ... the branding, and rights to use the name, and not the entire company,' Gibbons said.